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The £14,400 minimum cost of living

People on low incomes are increasingly struggling to get by due to soaring inflation, research suggests today.

A single person now needs to earn at least £14,400 a year to afford a minimum standard of living, while a couple with two children needs to earn £29,200, according to the Joseph Rowntree Foundation (see the Debt Problems guide).

The group says to obtain incomes of this level, a single person would have to earn £7.38 an hour, while a couple where both parents worked full time would need to earn £7.60 an hour each.

But both of these levels are well up on the minimum wage, currently £5.80 an hour.

The group says the gap between the minimum wage and the amount people need to achieve a minimum standard of living had widened during the past year, with single people now requiring 29p an hour more than they did in 2009, with couples needing 46p an hour more.

It says those on low incomes face a far higher rate of inflation than that reported by the official consumer prices index (CPI).

Huge inflation

The research found the cost of a minimum budget had risen by 38% during the past 10 years, due in part to a 37% rise in food prices, a 59% jump in bus fares and a 67% hike in council tax. But CPI has risen by just 23% during the same period.

The group says the Government's plans to increase benefits in line with CPI, rather than the retail prices index, in future suggested people relying on benefits would become increasingly worse off in real terms.

The research, which was carried out by the Centre for Research in Social Policy at Loughborough University for the Joseph Rowntree Foundation, looked at how much money people need to afford a minimum standard of living, as defined by members of the public.

The minimum standard includes essentials, such as food and housing, plus items and services that enable them to participate in society, such as transport, social activities and one week's holiday in the UK each year.

It says the earnings needed to achieve this had risen by 6%, or £1,600, for a couple with two children during the past year.

The group says the recent announcement in the Budget of a £1,000 hike in tax allowances from next year would help low income families by making them £320 a year better off, after inflation, if both partners worked.

Benefits cut

But it warns that all of these gains could be wiped out by other changes, including cuts in tax credits, which would cost families around £300, and the freezing in the rate at which child benefit is paid, which will cost them £50 in real terms.

It adds that they would also be hit by the rise in the rate at which VAT is charged to 20%, while the cap on housing benefit could affect people who had high rents, and they would also be hit by the slower rate at which benefits will be increased.

Donald Hirsch, head of income studies at the Centre for Research in Social Policy at Loughborough University, says: "This new research underlines how people living close to the minimum income standard can end up not having enough if economic trends start going against them.

"For example, a single person who a decade ago had just enough to get by, and whose income has risen in line with official inflation, cannot afford a minimum budget today.

"Big rises in the prices of things like food and council tax means that they are nearly £20 a week short of what they need, and must think of what essentials they will go without."

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